WorldCom

Gobble Gobble

Bernard Ebbers, Murray Waldron, and William Fields sat in the cafeteria of a Days Inn in Hattiesburg Mississippi and hatched a plan to sell long distance service at a discount. According to legend, their waitress was asked to come up with a name, and produced 'LDDC' - for 'Long Distance Discount Calls'. This was changed to 'LDDS' - for 'Long Distance Discount Service'. It was September 1983. By November, Bernie Ebbers was officially in charge.

After these humble beginnings (see original HQ right), LDDS and new chieftain Bernie Ebbers did all they could to get to the top of the telecom food chain - and understanding how this acquisition-hungry corporation grew into the mighty MCI WorldCom involves watching several merger threads simultaneously.

It takes until January of the following year for LDDS to sell its first minute of long distance service - to the University of Southern Mississippi. In the meantime, a company known as IDB Communications is also formed, which helps with the transmissions of the Democratic national convention, the Republican national convention, and the Olympic Games in Los Angeles.

In May 1985 WilTel Network Services (Williams Cos) is created. In July four portable ground stations are made available for the Live Aid concert's 1.6 billion viewers. In November IDB Communications builds a sports satellite system, and TRT offers a direct telephone service to Great Britain.

Work begins at WilTel in 1986 on a cable connection between Kansas City and Los Angeles - through a defunct oil pipeline. A 'T' is drawn to Salt Lake City as well. And IDB Communications begins its television transmission service.

By 1987 WorldCom has the third biggest glass fibre-optic network in the US, and Williams Telecommunications and LDX Net create the Williams Telecommunications Group, and add more cable to New Orleans, Houston, Dallas, and St Louis. In 1988 WilTel starts work on its cable link between Los Angeles and San Francisco.

In February 1989 WilTel agrees to purchase Lightnet's cable network for $365 million. This makes WilTel's network the fourth largest in the US after AT&T, MCI, and Sprint. In June LDDS takes over Microtel Inc, and in November IDB takes over the Hughes television network, giving it control of 37 transponders on 9 satellites. When IDB acquires CICI it can offer long distance service to 120 countries.

In August 1990 WilTel and MCI announce a long term agreement which provides each with access to the other's fibre-optic network. The agreement gives WilTel access to more than 30,000 system miles. After a series of smaller acquisitions around the US, LDDS acquires Advanced Telecommunications in December 1992, making it the fourth largest long distance carrier in the country. In March 1994 it acquires Dial-Net, with operations spread through half the US. In September of the same year, it acquires Resurgens Communications Group and Metromedia Communications in a three-way transaction, and after the merger LDDS is renamed LDDS Communications. And finally in December of the same year it acquires IDB WorldCom. Now hold on.

In January 1995 LDDS now acquires Wiltel Network Services for $2.5 billion from Williams. Following the Telecommunications Act of 1996, WorldCom signs agreements to become a long distance provider for GTE, Ameritech, and SBC Mobile Systems, and receives permission to provide local service in California, Connecticut, Illinois, and Texas.

In September 1996 MFS acquires UUNET Technologies, the world's first and largest commercial Internet service provider, and gains regulatory approval to connect into Ameritech's local networks in Illinois, Indiana, Michigan, Ohio, and Wisconsin - the first deal of its kind. In December of the same year WorldCom completes a merger with MFS Communications.

In September 1997 WorldCom announces plans to buy CompuServe from H&R Block in a $1.2 billion stock deal. WorldCom will keep CompuServe's data network and swap its online service for AOL's ANS network services subsidiary, giving WorldCom's UUNET Internet services a big capacity boost.

And on 1 October 1997 WorldCom announces an unsolicited $35.5 billion bid to acquire MCI Communications, the second largest long distance company in the US, and on the same day announces a deal to purchase Brooks Fiber for $2.9 billion, to boost its presence in local loops.

There you have it. That's how it's done. And if only the bubble hadn't burst - for two years later, despite FCC warnings to 'cool it', Bernie and WorldCom are hungry again, and this time they're going after Sprint - but Europe and the US federal government won't have it, and WorldCom eventually has to announce, after twelve months of unsuccessful negotiations, that the deal is officially off.

All the while, from Hattiesburg in 1983 to world domination with the MCI merger in 1997, Bernie's stock has gone up up up - and at this point is hovering at over $60. But as soon as there are delays in the Sprint deal, the stock begins its steady decline - and it never recovers. The day before the disclosure of questionable accounting practices, WCOME was down to $1.

WorldCom Files Record Bankruptcy Case (Wash Post 22 July 2002)
The parent company of Arlington-based MCI Group listed in its petition assets of $107 billion, making its collapse almost twice the size of Enron Corp.'s, whose December bankruptcy filing was the largest at that point. More...

THE NEW WORLD ORDER (Cover Story BusinessWeek October 1997)
First thing in the morning on Oct. 1, Ebbers picked up the phone in a New York hotel and called Bert C. Roberts Jr., chief executive officer of MCI Communications Corp. Roberts wasn't in, but he returned the call at about 8:30. Ebbers calmly informed the MCI exec that WorldCom, which had revenues of just $5.6 billion last year, was ready to proceed with an unsolicited offer for MCI, the No. 2 long-distance company, which had $18.5 billion in sales last year. Never mind that Roberts had recently gone through wrenching negotiations to re-price a long-anticipated merger with British Telecommunications PLC. Ebbers would top BT's $19 billion deal - offering $30 billion in stock and the assumption of $5 billion in debt. More...

THE MATH BEHIND THIS $34.5 BILLION DEAL (Cover Story BusinessWeek October 1997)
Nobody has ever accused WorldCom Chairman Bernard J. Ebbers of getting lost in a balance sheet. So how come he's offered to pay $11 billion more for MCI Communications Corp. than British Telecommunications PLC is willing to cough up? The answer is twofold: cost savings and a rich multiple on WorldCom's stock. More...

'THIS IS THE OFFICIAL DAY THE TELECOM WARS BEGIN' (Cover Story BusinessWeek October 1997)
It wasn't supposed to play out this way. Back in February, 1996, when the landmark Telecommunications Act deregulating the nation's local and long-distance calling industries was signed into law, telecom companies large and small predicted that the industry would eventually consolidate into five or so megacarriers. Each would offer the whole gamut of phone, data, and entertainment services to consumers and businesses--the one-stop communications shops that customers keep saying they want. And, predicted industry seers, only the biggest outfits would have the resources to stock that shop: that is, AT&T, MCI, Sprint, the seven Baby Bells, and GTE--in one or another combination. More...

Telescramble! (Cover Story BusinessWeek October 1997)
If the WorldCom-MCI deal goes through, other phone companies will likely be hustling to shore up their defenses and find partners to reposition their businesses. More...

THE BIG PROMISE IN LITTLE TELECOMS (Cover Story BusinessWeek October 1997)
It's a cruel irony. It was the race to get into local phone service that squeezed MCI Communications' earnings, depressed its stock, and made it vulnerable to the unsolicited takeover bid of WorldCom Inc. What's ironic is that while investors have pummeled MCI and AT&T for pouring millions into local-calling 'infrastructure', money-losing upstarts have become the toast of Wall Street for doing the same thing. More...

25 Banks Sue WorldCom, Allege Fraud (AP Online via COMTEX)
NEW YORK, Jul 14, 2002 -- A group of 25 banks charged in a lawsuit filed Friday that WorldCom Inc. defrauded them out of nearly $2.5 billion six weeks before publicly disclosing a $4 billion accounting coverup. The banks' lawsuit, filed in Manhattan's State Supreme Court, included a request for an order to immediately freeze $2.65 billion of WorldCom assets. Justice Helen Freedman, after oral argument, denied the request and scheduled a hearing for July 16. More...

FAA Passes on WorldCom Bid (AP Online via COMTEX - Dow Jones Newswires)
WASHINGTON, Jul 15, 2002 -- The Federal Aviation Administration Monday rejected WorldCom Inc.'s bid to build a $3.5 billion next-generation telecommunications network, dealing the troubled company a blow that could dash its hopes of recovery. More...